Showing posts with label EBO Employee Buyout. Show all posts
Showing posts with label EBO Employee Buyout. Show all posts

Wednesday, 4 October 2017

How to price an EBO (Employee Buyout)?

To continue with the case of Uber, in my opinion a perfect candidate for an EBO, one should ask how and on what terms an EBO should be executed. It makes no sense to start with the 'market' valuation as it will be as good a reflection of the real value as the price of bitcoins is for a digital entry on some computer. The only sensible starting point is the net asset value, i.e. the cumulative value of REAL investment that supports the business. As the firm cannot function without employees they should be able to drive a hard bargain.  While not being a supporter of Jeremy Corbyn's extreme views he may have a point with regard to re-nationalising the key utilities. Again, the baseline scenario for any compensation should be what the underlying assets are worth, not necessarily some number that 'Mister Market' arrives at during his random walk from manic depression to euphoria.

Business Schools would be well advised to work on how to make Wider Share Ownership and Employee-owned business work rather than how to squeeze the last dollar out of customers and into the pockets of a few top executives, - and at the same time charging students fees that bear no relationship to the value provided. Most of what they perpetrate any astute person could learn by delving into the top 10 or 20 business/economics text books.

Softbank to invest in Uber?

What is the purpose of this muted investment? Uber hardly needs any cash - except to pay exorbitant 'compensation' to top executives and the existing investors. But basically the drivers ARE all there is to Uber, without them the firm is nothing except a bit of software (which can easily be put in place for a fraction of its valuation, i.e. net asset value of fixtures). All Softbank and its backers want to do is get hold of the stake and sell it to someone else at a later stage - probably the great unwashed public and it agents, the fund management community that will lap up any IPO however inflated the price may be.
People sniggered when MBO's and LBO's came into fashion during the 1980s. Now it is time for the EBO - the Employee Buyout. Unions and Investment Bankers have to team up and take control of business. Let capitalists (lenders, Share owners) control the underlying hard assets but wrest ultimate control from them. As the saying goes: all wheels come to a standstill if the workers don't participate.
BBC